A practical guide to the use of the chain-ladder method for determining technical provisions for outstanding reported claims in non-life insurance

AutorInnen: Björn Weindorfer

Erscheinungsdatum: 30.10.2012

Studiengang: Bank- und Finanzwirtschaft/ Quantitative Asset and Risk Management


The Solvency II directive establishes a revised set of capital adequacy rules for insurance and reinsurance
undertakings in the EEA. The starting point for assessing the available capital of an undertaking is to value
its assets and liabilities. The liabilities of insurance undertakings include the technical provisions which
constitute a significant proportion of their balance sheets. Under Solvency II the projection of run-off triangles
is one of the allowed methods for valuing the technical provisions for non-life insurance business. This paper
demonstrates how the chain-ladder method, a simple form of run-off triangle methods, can be used by a
non-life insurer in determining the technical provisions for outstanding claims.